At this rate, the US oil rig count will be zero by August

But during the last four weeks, the plunge gained
significant momentum and has dropped at the fastest rate in about
a year.

And at this rate, the oil rig count will be zero by August,
according to Morgan Stanley's Ole Slorer in a note Monday.

Slorer notes that a dangerously small number of oil
rigs can operate with oil prices below $30 per barrel.

On Monday, West Texas Intermediate futures were up about 2%, near
$33.61.

Clearly, it is unlikely that there will be no active oil
rigs in all of America in the foreseeable future, and certainly
not by August.

But here's the scenario, from Slorer's note (emphasis ours):

The US rig count continues to decline at a precipitous pace given
the maturity of the current bear market. According to
Schlumberger's presentation last week, further rigs are
expected to stop working by the end of 2Q16. Data from Rystad
Energy indicates that fewer than 20% of wells drilled this month
have a well breakeven below $30/bbl, and when accounting for
other costs such as transportation and G&A, this figure is
meaningfully reduced. This suggests that at WTI of
$30/bbl or below, E&Ps are likely to continue dropping rigs
at a rapid pace. Using an average decline of 22 rigs per
week witnessed YTD, we would theoretically reach zero rigs before
August.

Also, Slorer notes that some rigs have a "held by production"
provision, meaning drilling can continue beyond the agreed
expiry of the lease.

In essence, Slorer is saying that the rig count is near the
point where we're either close the bottom in declines or
everything is about to go bust. And with the latter unlikely, he
forecasts that the bottom in the rig count will be in around
the summer.